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In the last post, we started a discussion on how to determine and properly classify employees to see if they are exempt. Be sure to check out that last post here. As a reminder, the salary level has to be at least a fixed $684 per week (meaning that it does not fluctuate with quantity or quality of work), and the employee must have a primary job duty that fits into one of the exemptions that we are going to talk about here. 

The most common set of exemptions fall into the “Executive Administrative Professional Exemptions.” 

An employee classified for the executive exemption is a person who manages the business or a recognizable segment of the business, which could be a division, subsidiary, or department. This person manages at least two people or two full-time equivalents (for example, that could be one full-time employee and three part-time employees), and with regard to those individuals they have the right to hire and fire, or their opinions about hiring and firing are given significant weight by the company. The executive exemption is designed for employees who manage departments, other employees, or the business as a whole. 

Let’s take a look at an executive exemption example from the restaurant world. At a restaurant, you may have one General Manager and a couple of Assistant Managers. If the General Manager is not there but the Assistant Manager is, they may be responsible for the kitchen staff. As long as there are at least two full-time equivalents, you could pay that Assistant Manager a salary, so long as that salary level does not fluctuate. 

The administrative exemption is actually designed for a managerial employee, not an administrative assistant. The administrative exemption applies to someone who works in an office. This cannot be manual labor. They must be performing office-based work that is of significant value to the company. The individual must have discretion over matters of significance. The phrase “matters of significance” may be hard to define precisely, but usually includes the ability to make decisions related to the provision of services to customers or clients which would bind the company in some way.  

A good example of the administrative exemption is a project manager who does not direct any employees or maybe just one, but manages resources such as financial or material goods. I want to be very clear that an administrative assistant or executive assistant, even if they have some discretion, probably does not have enough discretion over matters of significance to enable them to qualify as an administrative exemption under the Fair Labor Standards Act.

Next is the professional exemption, which includes three primary designations:

First under the professional exemption umbrella are Licensed Professionals, which could be a doctor, lawyer, engineer, accountant – those who have a professional license issued by a state. These licenses required an extended amount of study, usually some sort of licensing exam, and then the professional is given the freedom to act within their field with their professional discretion.

Second under the professional exemption umbrella are creative professionals who work in a recognized field of art or creativity. They are given the discretion to act within that field, whether that is a graphic designer, website designer, etc.

Lastly, computer professionals also qualify within the professional exemption. These folks have discretion regarding hardware, programming, etc. This does not apply to everyone who is computer-based. Think more of a software or network engineer, and not someone that works at a tech help desk.

The last exemption we will address today is the outside sales exemption. An outside salesperson is someone who spends the majority of their time away from the office. Their physical location of being away from the office is an important factor. Often times, those individuals are compensated by commission. They may receive a minimum salary alongside an outside sales position qualifies them for exemption status.

There are other exemptions that are available, but these are the primary ones that cover the vast majority of jobs. The job duties of these exempt personnel are vital. The descriptions should reflect reality as the employee works. So if the job description does not match the real world, the employer could be looking at a misclassification claim by the state or by the employees themselves.

Have any lingering questions? Contact us today and we would be happy to help you analyze your employee classifications before the new overtime regulation goes into effect in January 2020.